April 19, 2012Doug Hadden
Doug Hadden, VP Products
Performance Management has had a significant impact on government thinking. Governments want to improve development outcomes. There are numerous techniques and tools used in the private sector.
Corporate performance management uses techniques like key performance indicators (measure what is important) and balanced scorecards (show what is important) to improve performance. Government organizations use many of these same techniques.
Performance Management is more difficult in government
Private sector organizations have a bottom line: profit. There are established measurements like market share, and return on assets. Output measurements like the number of customer complaints handled, and outcome measurements like customer satisfaction survey ratings are factors that influence financials – profitability. If all the KPIs are green and the company is not making a profit, than the indicators are likely incorrect.
The key difference for government is the importance of budgeting
There is no bottom line in government. Outputs and outcomes are the results. Financial – in this case, budgets, is the input. This makes it very difficult to determine whether the KPIs are correct. There could be false positives and false negatives.
We’ve developed a framework to analyze government performance management maturity. It’s part of our public financial management benchmark process. The benchmark identifies political will (politics, policy), technology enablement (platform) and performance management functions (planning, people, public, private sector)
Political will is required to improve government performance. Politicians often campaign based on inputs – earmarking government programs for a particular region. In the past, politicians in power rarely focus on program effectiveness. We identify political incentives in countries for performance management and the degree of focus on effectiveness and efficiencies.
Effectiveness and efficiency needs to be expressed in government policy. We examine national development plans, donor country strategies, and transformation plans to determine whether the government is ready to implement performance plans. And, in the sectors in which performance planning would have the biggest impact.
The technology platform used for Government Resource Planning is examined. Information may not be integrated, timely or accurate. The computing infrastructure may be dated.
Public financial management processes also benchmarked. We examine the support for international public sector accounting standards and PFM good practices. Good practices are the basis for performance improvement.
Government expenditures are controlled based on the budget. Budgets are the legal embodiment of government objectives and policy. The approved budget is often called the organic budget law or the budget vote. Government budgets should be credible. The planning – assumptions and expectations should be rational. The planning mechanisms to align objectives with budgets and the subsequent controls are benchmarked. We benchmark the maturity of performance budgeting.
Effective civil service management improves performance. We benchmark government capacity, recruitment, training programs and the extent to which merit plays a role in promotion and income.
Transparency enables accountability and accountability encourages performance improvement. We benchmark budget, procurement, human resources and audit transparency. (This is similar to our Budget 2.0 benchmark, also part of our PFM-specific processes).
P7: Private Sector
Governments seek to improve development outcomes. This means enabling private sector growth. This is why “doing business” is such an important benchmark. Governments also seek “value for money” in government procurement. We benchmark procurement policy, transparency and arrears.